APTEL Asks GERC To Reconsider Decision To Adjust Dues From Wind Project Against Unrelated Default

Highlights :

APTEL has ordered GERC to review the matter with an “open mind” and “not feeling bound by any view taken earlier”.

APTEL Asks GERC To Reconsider Decision To Adjust Dues From Wind Project Against Unrelated Default CERC Allows Adani Subsidiary Compensation For 'Change of Law' Events

In a rather interesting judgement, the Appellate Tribunal for Electricity (APTEL) has set aside an order passed by the Gujarat Electricity Regulatory Commission (GERC) in 2019 to reject a wind developer’s claims for the payment of dues. APTEL has ordered GERC to review the matter with an “open mind” and “not feeling bound by any view taken earlier”.

In 2017, wind developer Kaze Energy Limited entered into a 25-year long Power Purchase Agreement (PPA) with Gujarat Urja Vikas Nigam Limited (GUVNL) to supply energy from a 48.3 MW wind power station in Jamnagar, Gujarat, at Rs.4.19 per unit tariff. However, Kaze Energy received the due payments from GUVNL only till the generation month preceding November 2018, due to which it petitioned GERC, seeking directions for the payment of the due amounts for the electricity supplied. GERC dismissed the petition in July 2019, following which Kaze Energy approached APTEL regarding the matter.

While the controversy between the parties was brewing on account of default in payment, certain developments were taking place before the National Company Law Tribunal (NCLT) at Mumbai, some proceedings having been taken in due course by appeal before National Company Law Appellate Tribunal (NCLAT). Such proceedings concerned a company known as Infrastructure Leasing & Financial Services (ILFS), whose subsidiary is ILFS-Wind Energy (ILFS-WE). ILFS- WE, in turn, held at the relevant point of time 51 per cent stock in Kaze Energy. Proceedings had been taken out against ILFS before NCLT, during which the process similar to resolution process under Insolvency and Bankruptcy Code was undertaken.

It appears that GUVNL was the administrator of GEB Contributory Provident Fund and had made investment to the tune of Rs.180 crores approximately in three companies viz. ILFS, ILFS Transportation Network India Limited and ILFS Financial Services during 2010-2017. The subsequent exchange of correspondence and pleadings before the concerned authorities brought to light that by stopping the payment of dues of Kaze Energy under the PPA, GUVNL was claiming a set-off against the money due to the wind developer on account of the fact that it was under the control of a subsidiary of ILFS.

Against this backdrop, in July 2019, GERC rejected Kaze Energy’s petition seeking directions for repayment of the due amount by GUVNL. Following this, Kaze Energy had approached NCLAT, requesting the tribunal to direction GUVNL to pay the dues and to be prosecute it for its wrongdoings in the matter. However, in October 2019, a company named ORIX bought out the entire shareholding of ILFS-WE in Kaze Energy, making it a wholly-owned subsidiary of ORIX.

After considering the above facts of the matter, APTEL stated that since Kaze Energy was no longer under ILFS’s control, there was a “material change” in the case, which necessitated a revisit of the wind developer’s petition that was dismissed by GERC in July 2019.

“In these circumstances, the question of GUVNL claiming a set-off against dues of the appellant will require to be looked at afresh. In this view of the matter, we deem it proper to set aside the impugned order and remit the case arising out of the petition of the appellant for fresh decision to the respondent Commission. We order accordingly. Lest there be any doubts, we make it clear that nothing said by us in this judgment will be treated as expression of opinion on any of the questions of law that arise,” ruled APTEL.

Given that Kaze Energy’s claim for recovery of its dues has been pending all these years on account of the parallel proceedings before the NCLT and NCLAT, APETL urged GERC to prioritise the wind developer’s petition through a speedy verdict, preferably not later than four months from the date of the present order.

“We must add that while deciding the matter anew, the Commission will bear in mind that it will be expected to take fresh decision with open mind and not feeling bound by any view taken earlier,” cautioned APTEL.

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Soumya Duggal

Soumya is a master's degree holder in English, with a passion for writing. It's an interest she has directed towards environmental writing recently, with a special emphasis on the progress being made in renewable energy.